Review of Mon Mar 19 2018
Summary:
Monday started with a gap down and a break of 2745. It was the worst day since the start of February.
The decline of Facebook Stock sparked the collapse and carnage of Monday which spread across all sectors including utilities and bonds.
Let’s look at Monday’s statistics to see what we might encounter on Tuesday.
Closing Statistics:
S&P 500 Index down 39.09 to 2,712.92
Dow Jones Index down 335.60 to 24,610.91
NASDAQ Index down 137.74 to 7,344.24
Stock Market Outlook Chart Comments At The Close:
The S&P dropped below the 50 and 21 day moving averages on Monday in a dramatic pullback of 39 points.
This left behind a bearish candlestick for Tuesday and the index within a few points of the 100 day moving average.
The 50 and 100 day moving averages havestopped climbing and are instead trending sideways.
The 0 day moving average is falling and the Lower Bollinger Band has moved to the 100 day moving average.
The retesting of the 2745 valuation on Thursday and especially Friday last week were signs that the index might break below. Today we found out the truth as the index fell through 2745 and thenquickly moved to the 2725 and 2710 levels where there is some support in the market.
The Bollinger Bands Squeeze is still in play and while I had originally though it would send stocks higher, we might see the opposite. The chart is turning bearish.
Stock Market Outlook review of Mon Mar 19 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and falling.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal on March 5. The buy signal is almost gone on Monday by the close. We could get a sell signal on Tuesday.
Ultimate Oscillator: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months. The Ultimate Oscillator signal is negative and falling.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic has a down signal in place.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal. The RSI signal is turning down.
Rate of Change: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline. The rate of change is negative and falling which indicates lower prices are expected.
Support Levels To Be Aware Of:
2745 to 2750 is light support
2710 is light support.
2700 is good support.
2675 is light support.
2650 is light support and 2620 is also light support.
There is good support at the 2550 level from where the market bounced back from the recent correction.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Tue Mar 20 2018
Technical indicators are pointing to the S&P moving lower on Tuesday.
All the indicators are showing signs of stress and a number have turned negative to start off the third week of March.
For Tuesday we should see a lower open and then a bounce attempt which will fail mid to late Tuesday morning.
The following day (Wednesday) we get the interest rate decision from the Federal Reserve. That could make the market calmer on Tuesday and a bit more subdued ahead of that announcement. It is widely expected that interest rates will be raise on quarter of a percent on Wednesday.
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